Inflation Data Likely to Keep Fed on Track to Hold Steady; U.S. GDP Surges; ECB Ends Rate-Hike Run; Bank of Russia Lifts Key Rate Again By Michael Maloney
Good day. The Federal Reserve's favorite inflation measure, due to be released today, is estimated to show that price pressures picked up modestly last month amid a surge in economic growth, a strong labor market and a consumer spending splurge. Yesterday, third-quarter GDP data showed the U.S. economy grew at the fastest pace since 2021, as consumers spent at a blockbuster rate that will be difficult to sustain. Meanwhile, the European Central Bank held interest rates steady on Thursday, ending a historic run of 10 consecutive rate increases as Europe's currency union teeters on the brink of recession and uncertainty rises around the global economy. And this morning, Russia's central bank raised its key interest rate for the fourth time in an effort to contain a surge in inflation as manpower and other resources are diverted to sustain the invasion of Ukraine. The size of the central bank's hike was bigger than the move expected by economists.
Now on to today's news and analysis.
Top News Inflation Trends Likely to Keep Fed Rate-Hike Pause on Track
Economists surveyed by The Wall Street Journal estimate the Commerce Department's core personal-consumption expenditures price index, which excludes volatile food and energy prices, increased a modest 0.3% in September from the prior month, after a 0.1% rise in August. From a year earlier, they estimate prices rose 3.7% last month, compared with 3.9% in August. The inflation data is due to be released at 8:30 a.m. ET.
U.S. Economy U.S. GDP Grew 4.9%, Driven by Consumer Spree That May Not Last
Gross domestic product expanded at a 4.9% seasonally and inflation-adjusted annual rate in the third quarter-more than double the second-quarter pace-the Commerce Department reported Thursday. The acceleration won't change the Federal Reserve's plans to hold rates steady at its meeting next week.
Heard on the Street: What Will the Economy Do for an Encore? Video: What the GDP Report Means for Inflation and Odds of Recession 'Can't Take Recession for Granted' After GDP Data: Traders See 2024 Fed Rate Cuts Anyway (MarketWatch) The UAW-Ford Deal: What's in the Contract
The United Auto Workers reached a new tentative labor deal with Ford Motor on Wednesday, calling workers off the picket lines at the automaker. Here's what to know about the deal, what's next for Ford and the union, and what the agreement means for the company as well as its rivals.
Ford Retrenches Further on EVs, Citing Waning Demand Investors Like NY Subways. San Francisco's BART? Not So Much.
Wall Street is betting on a messy and divided recovery for U.S. city mass transit systems. Some cities are facing budget crises due to dwindling Covid aid and lower ridership. Others have found new revenue streams.
Key Developments Around the World European Central Bank Ends Record Run of Rate Increases
ECB officials agreed to hold the bank's deposit rate at 4%, a record high for the institution created in 1998. ECB President Christine Lagarde signaled that eurozone borrowing costs may have peaked as past rate increases increasingly weigh on the region's housing market and bank lending.
Russia's Central Bank Raises Key Rate More Than Expected
The Bank of Russia lifted its key interest to 15% from 13%, double the size of the move expected by economists. When the central bank started its current series of increases in July, the key rate stood at 7.5%. The series of rate rises, aided by the reintroduction of some capital controls, has helped steady the ruble, which had previously been tumbling. However, the central bank said consumer prices continue to increase more rapidly than it had expected, while government spending will stay high for longer than previously indicated. In a statement, the central bank said rates would have to remain high for some time. "Tight monetary conditions will be maintained in the economy for long," it said. (Dow Jones Newswires)
Turkey Lifts Interest Rates to 35%
Turkey's central bank lifted interest rates to 35% , one of the highest levels in the world, as policy makers continue to battle sky-high inflation. Turkey's interest rate now trails only a handful of countries including Argentina and Zimbabwe.
U.S. Trade Loophole Fuels Rise of China's New E-Commerce Firms
A law that allows low-price packages to enter the U.S. duty-free and with little customs scrutiny has enabled the breakneck growth of two e-commerce companies with roots in China: Shein and Temu.
Financial Regulation Roundup Sam Bankman-Fried Says FTX Actions Were Guided by Lawyers
Sam Bankman-Fried testified in an unusual hearing that he relied on the blessing of lawyers to make business decisions such as deleting communications and making loans to himself, actions that prosecutors said allowed him to commit the crimes that led to the implosion of the FTX crypto exchange.
Climate Activists Want SEC to Copy California, Europe
Climate activists are urging U.S. regulators to follow the footsteps of the European Union and California as they work to finish requirements for public companies to disclose their greenhouse-gas emissions .
Former Inspectors of Company Audits Say Process Needs Retooling
The process to inspect the audits of U.S. public companies needs an upgrade , according to some of the people who should know best-former inspectors who did the work over the last two decades.
Student-Loan Payment Processors Draw Probe on Wait Times, Advice
The federal government is investigating allegations of botched customer service by loan-processing companies over their handling of questions about the resumption of student-loan repayments after a three-year pandemic pause.
Forward Guidance Friday (all times ET)
Time N/A: ECB's Lagarde at Euro Summit in Brussels
8:30 a.m.: U.S. personal income and outlays, and PCE price index for September
9 a.m.: Fed's Barr speaks at Economics of Payments XII Conference
10 a.m.: University of Michigan consumer survey, final for October
Research Bar for ECB Seen High for Both Rate Hike and Rate Cut
The bar for another interest-rate hike by the European Central Bank is high, but the bar to start cutting rates is even higher, Ann-Katrin Petersen, senior investment strategist at the BlackRock Investment Institute, says in a note. The ECB left interest rates unchanged on Thursday, as expected, and BlackRock expects rates staying around their current levels well into 2024, she says. "With a tight labour market and subdued productivity, we think the risk that inflation doesn't ease enough will prevent the ECB from considering any cuts until well into 2024," Petersen says.
-Emese Bartha
Malaysia's Central Bank Expected to Stand Pat on Rate Next Week
Malaysia's central bank is unlikely to follow regional peers in resuming rate hikes and will likely keep its policy rate unchanged at 3.00% at its coming meeting on Nov. 2, HSBC Global Research economist Yun Liu says in a note. The central banks of Thailand, Indonesia and the Philippines have all resumed rate hikes, but Malaysia is unlikely to follow suit as its inflation has been well-contained, she says. Headline inflation continued to cool down to below 2% on year in September, the second lowest in Asean, just after Thailand, she says. While Malaysia faces upside risks to inflation, it has signaled more willingness to provide fiscal relief than peers, she says, noting that the government expects to provide subsidies of MYR81 billion this year.
-Monica Gupta
Commentary Forget the 1%. Mini-Millionaires Are Where Wealth Is Growing Fastest.
Last week the Fed revealed that in 2022 the average net worth of American families topped $1 million for the first time. But the wealth gains aren't purely a phenomenon of the top 1%. Many in the upper middle class are now millionaires thanks to college, savings, bull markets and timing, writes WSJ's Josh Zumbrun
Ukraine War Makes European Banks Look Rougher Than They Are
European investment banks don't tend to fare well when compared with their more profitable U.S. peers. But the war in Ukraine makes some comparisons unfair, writes WSJ's Jon Sindreu .
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Basis Points Orders for durable or long-lasting goods rose 4.7% in September, largely because of a flush of new contracts for Boeing airplanes. Most other manufacturers saw smaller improvement, MarketWatch reports . Initial U.S. jobless claims rose by 10,000 to 210,000 in the week ended Oct. 21, the Labor Department said Thursday, MarketWatch reports . Economists polled by The Wall Street Journal had estimated new claims would rise 9,000 to 207,000. Pending U.S. home sales, an index tracking contract signings for existing homes, increased slightly in September, the National Association of Realtors said Thursday. The index gained 1.1% from August's reading, Barron's reports . The U.S. trade deficit in goods widened 1.3% to $85.8 billion in September, according to the Commerce Department's advanced estimate released Thursday, MarketWatch reports . An advanced estimate of wholesale inventories, meanwhile, showed no change in September. Retail inventories climbed 0.9% in the month, according to an early estimate. Factory activity in the central U.S. fell for the second consecutive month in October, while expectations for future activity held steady, reflecting the fragility of the region's manufacturing economy. The
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10-27-23 0720ET
